Military Capabilities

European Commission proposes tax exemption measures to facilitate common defence efforts

24 April 2019

The European Commission aims to eliminate taxes on a broad range of activities linked to the EU’s Common Security and Defence Policy (CSDP), from multinational exercises to capability projects flowing from the union’s two-year-old Permanent Structured Cooperation (PESCO) framework. Such an initiative would match the fiscal exemptions that NATO’s European allies have enjoyed since 1977.

The EU executive on 24 April unveiled its draft directive to exempt supplies to armed forces from value added tax (VAT) and excise duties when forces are deployed outside their own territory for a European defence effort. Noting that the proposal’s main objective “is to align the VAT treatment of defence efforts in the EU and NATO frameworks as far as is feasible”, the Commission said the change will also address the growing need for military mobility across Europe.

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